Moody’s Investors Service said Sri Lanka, which is rated B1 negative, has several large external debt repayments due between 2019 and 2022.

“The bunching of these future external liabilities, which will average $3.6 billion per year, raises rollover and external vulnerability risks,” it said in a new report on the government of Sri Lanka credit profile.

“Sri Lanka's significant borrowing requirements and heavy reliance on external and foreign-currency funding expose the sovereign to material liquidity and external financing risk, which weighs on the sovereign's credit profile,” the report said

“Unless reserves rise still further, reserve coverage will weaken and external vulnerability will increase from 2019 when large international debt repayments are due,” it said.

Reforms that continue to advance fiscal consolidation and exchange rate flexibility, along with implementation of an effective external liability management strategy, would mitigate external risks and help support Sri Lanka's credit profile, the rating agency said.

“This external vulnerability stems from the structure of the country's government debt, with large shares of external financing and foreign currency debt combining to heighten the government's susceptibility to changes in financing conditions,” the report said.

As of 2016, total external debt (local and foreign currency external debt of combined public and private sectors) was about $47 billion (about 57% of GDP), of which about 68% was public sector debt.

The government's foreign currency-denominated debt was about 43% of total general government debt in 2016 and about 34% of GDP.

Moody's notes that Sri Lanka's foreign currency reserves fell to a low of $4.1 billion in April 2017 from a peak of just over $8.1 billion in August 2014, but by August 2017, reserves had been rebuilt to $6.7 billion.